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Radar signal processing system is an important part of vessel traffic services. In order to overcome the shortcomings of traditional analog video system, this paper proposes a design solution for digital radar signal processing system based on DSP and a new method that is a constant false alarm rate algorithm based on wavelet transform. This method can suppress the interference of sea clutter without impairing the target resolution. Experimental results demonstrate this system can increase the detection accuracy and reduce the false alarm rate. Furthermore, the tracking performance can be improved. Radar signal processing system based on DSP plays an important role in the vessel traffic services.